SINGAPORE - The acquisition of air cargo handler WFS will provide a pathway to profitable growth and increase share value to shareholders, said Sats in its written responses to shareholders’ questions prior to the extraordinary general meeting to vote on the acquisition.
Sats believes that the acquisition will provide a trajectory of positive financial performance, which would give the company a platform for a sustainable future that will be beneficial for shareholders. The decline in Sats’ share price, which has fallen from over $4 in September 2022, to $2.89 last Friday, is partly due to macroeconomic conditions, according to the company.
“Your board and management recognise the significant impact that the decline in Sats’ share price has on our investors,” it said.
Shareholders have also registered their doubts over the timing for the acquisition amid a rising interest rate environment and the lack of dividends from Sats. WFS, according to Sats, is a highly strategic, one-of-a-kind asset that will transform its portfolio with the prospect of creating an Americas-Europe-Asia-Pacific network with 201 cargo and ground stations in 23 countries.
The acquisition will also allow Sats to scale and achieve efficiencies across its network, operations and data. The global footprint will also strengthen the company’s business and earnings against structural industry dynamics and competition.
Sats has also secured a three-year euro term loan facility between 4 per cent and 4.5 per cent per annum. These terms are comparable to the existing credit facilities the company has.
“Sats is confident that it will be able to deleverage and meet its debt commitments with the potential free cash flows that the combined business is expected to generate post-acquisition,” it said.
Shareholders also asked how Sats would maintain or exceed WFS’ revenue, profit and growth in the next three to five years. The company said that the WFS management team has indicated their commitment to continue working with WFS after the acquisition to drive the next phase of growth.
Post-acquisition, WFS will become a wholly owned subsidiary of Sats, with its chief executive officer Craig Smyth reporting to Sats CEO Kerry Mok. Mr Smyth will continue to run WFS’ day-to-day operations for the first year and the board of directors will have oversight and supervision over the new business through a subsidiary board.
A joint integration team will also work on capturing run-rate earnings before interest, taxes, depreciation and amortisation synergies of over $100 million through specific initiatives.
“Sats will also be working on optimising WFS’s capital structure and funding options,” it said.
With China’s reopening, shareholders remarked that Sats could achieve sizeable profits on its own. However, the debt incurred for the acquisition would likely result in no dividend until Sats is profitable without government reliefs.
“Your board and certain management team members are also shareholders of Sats, and our interests are aligned with all Sats’ shareholders to see dividends being paid. We are cognisant of the dividend expectation and we strive to work towards profitable growth that will enable Sats to pay dividends to all shareholders,” it said. THE BUSINESS TIMES
